Fidelity in financial services sector foray

FIDELITY Life Assurance will soon venture into financial services after the group applied to the Reserve Bank of Zimbabwe for a micro-banking licence with a view to expanding into commercial banking.

Report by Staff Writer

Well-placed sources said Fidelity is keen to expand into financial services taking up from the successes of the group’s microfinance institution.

It is among the four firms which have applied for micro-finance banking licences. The approvals are set to be affected by the new minimum capital threshold which stands at US$5 million, up from US$1 million.

Fidelity re-opened its microfinance subsidiary at the beginning of January 2010. At present, Fidelity Financial Services contributes around 5% of the group’s profits.

Fidelity Life CEO Simon Chapereka confirmed the bank had only applied for a micro-banking licence. He said the group was looking at various models to expand the business for its shareholders.

Chapereka said: “We have a micro-finance institution with a book of US$6 million and we believe we can give a better deal to our depositors.”

However sources say the scope of the group is not only limited to a micro-banking licence but would also look into mainstream banking through the acquisition or partnership with an existing commercial bank for the long-term.

A number of banks are currently looking at various options on how they can meet the RBZ’s capital requirements of a staggering US$100 million. ZABG, Trust and ZB Holdings are involved in talks with potential investors.

There are also reports Ghanaian group CDH Financial Holdings would open shop in Zimbabwe next year although it is still not yet clear whether they are coming as a stand-alone unit or as an equity partner with an existing bank.

Fidelity has also diversified its investment portfolio into property, with housing developments in Manressa (middle density) and recently in Southview Park (high density) in south-east Harare on land formerly belonging to CFI.

Chapereka said the group has a business model whose services complement each other. “For example we gave sugar cane farmers loans and offered them life insurance cover, medical aid and funeral assurance in the process,” he said.

The group has leveraged on its balance sheet to fund its expansion. The balance sheet has grown to over US$40 million from lows of US$6 million at dollarisation.

“As a long-term player, you need to have exposure in property, equity and money markets and our current portfolio mix is designed to take advantage of opportunities arising in these sectors.

“When you get an opportunity to invest in property you should go ahead because you will never go wrong,” Chapereka once said.

Last year Fidelity was the best performing counter on the Zimbabwe Stock Exchange with a year-to-date gain of 627%, but has not been able to sustain the momentum this year as it has a year to date loss of 28,13% at 11,5 US cents (Wednesday’s closing prices). Fidelity has a market cap of US$41,43 million.